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The Disparity Between Manufacturing Costs and Sale Prices

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The Disparity Between Manufacturing Costs and Sale Prices

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From 2007 to 2016, Mylan raised the price of its EpiPen about 500%, from under $100 to more than $600. From 2002 to 2013, insulin prices more than tripled. From 2012 to 2019, the average price of AbbVie’s rheumatoid-arthritis drug Humira went from $19,000 a year to $60,000 a year.

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1. Manufacturing companies play a big role in drug pricing as they develop new treatments and run clinical trials with essentially no laws governing the way the drugs are priced. Pharmaceutical companies price based on a drug’s estimated value, which means what they “believe the market will bear,” said Dr. Aaron Kesselheim, an associate professor of medicine at Harvard Medical School. This causes extreme prices for the best and most recently developed medications.
2. The manufacturers make the drugs that the wholesalers buy for the full or close to the full price and make it available to pharmacies. From the manufacturers’ perspective, they've done their part: they’ve put a drug on the market and gotten paid for it.
3. There would be little demand for the drug if insurance companies didn’t make it available to consumers by listing it on their formularies, and employer-sponsors weren’t making the insurance available to their employees. This is where pharmacy benefit managers step in to negotiate with manufacturers and insurers to get drugs priced and listed.
4. Manufacturers pay a fee in the form of a rebate.
5. Consumers with health insurance pay an amount that ranges from a fixed co-pay to some percentage of the full list price when purchasing the drug.

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The Lower Costs  Now Act aims to decrease the astonishingly high prescription drug prices. As the prices are rising, Medicare is not allowed to try to change or ask for lower drug prices. This affects everyone because at some point or another, you will need medicine.
Some standards the act wants to accomplish are:
- Giving Medicare the ability to negotiate prices
- Centers for Medicare and Medicaid Services have to negotiate prices for insulin, 25 prescription medication that has no generic brand, these medications have to be from a list of 125 drugs that have the greatest national spending or greatest medicare spending.
- Lowering the maximum price for prescription medication.
- Creates a $2,000 limit on drugs that need to be paid for by the patient.
- To ensure negotiations produce real price reductions, the legislation creates a maximum price for any negotiated drug with an international price index, to be called the Average International Market (AIM) price.

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This bill was introduced September 19, 2019. It passed the House of Representatives, and now will be going to the Senate.

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Our special interest group focuses on health issues and fights for better treatment, conditions and costs for medical/hospital patients. They have donated $59,576 to candidates in total to help progress their actions.

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Elliot L Engel represents District sixteen in New York. This district covers Northern Bronx and Southern Westchester. His first election in 1988 and he is apart of the Energy and Commerce committee and he is the Chairman for Foreign Affairs. His campaign had $8,400 donated from Greater New York Hospital Association.

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1) https://www.opensecrets.org/members-of-congress/summary?cid=N00001003&cycle=2020
2) https://www.opensecrets.org/federal-lobbying/bills/sponsors?cycle=2019&id=hr3-116
3) https://www.opensecrets.org/orgs/summary.php?id=D000034173
4) https://www.govtrack.us/congress/bills/116/hr3
5) https://time.com/5564547/drug-prices-medicine/
6) https://www.speaker.gov/LowerDrugCosts